What is EDI?

For several hundred years, commerce has been based upon the movement of written documents. These documents contained the information that one company needed to convey to another company in order to do business. Over a period of time the documents started to take on standard names such as Invoice, Credit Note and Order. However, the documents were certainly not of any standard layout. They did not need to be because the recipient was always a human being and humans have the ability to read, interpret and rationalise. About all that could be said of an invoice document, for example, was that it would contain header information about the parties involved, detail lines about the products, quantities and prices, and finally some totalling information.

In the early 1950s, computers started to be used by large companies for their accounting and payroll needs. Throughout the following decades, computers rapidly took over task after task until they were involved not only in accounting, but in production, administration and all other areas of commerce. But one thing did not change. The computers still produced printed documents in various non-standard formats.

This situation was not too bad for those sending a document but was much worse for the receiver. Many documents must be sent from one company’s computer to their trading partner’s computer. Computers cannot easily read written documents, and getting them to understand what they have just read is an almost impossible task, so the receiving company would have to employ personnel to re-key the information from the received documents into the company’s computer system.

Urgency Issues

The time factor was also a problem. The company sending the document had printed it in a few seconds. It was placed in an envelope and then posted. The document would probably take several days to reach the final destination (always with the possibility of accidental loss) where the envelope would be removed and the document presented for keying in to another computer.

For a long time, managers had been thinking how good it would be to have “Just in Time” production techniques, where a supply lorry would be able to arrive at the production line gates just in time to be unloaded and its contents taken directly to where they were needed on the production line. They dreamed of an end to costly warehousing and stock control. But these methods were impossible while the trading partners were still using the post. Lorries would be arriving at the wrong times, or not at all, causing the production lines to stop and chaos to reign, all because of the delay in the information flow.


Part of the answer to these problems was computer communications and the need to make one trading partner’s computer “talk” to another. Communications have been in existence since the early days of computers. A file can be transmitted from one computer to another, either over a normal telephone line or over a “Leased Line” that is continuously in use and dedicated to computer communications. Many commercial products exist that can move files in this way.

Communications did not solve the whole problem though. Once a file is received it needs to be understood by the receiving computer. Items of information must be in the exact place that the computer is expecting them. If just a single character is out of place, the whole file will become uninterpretable by the computer.

In the early days of communications, trading partners had to spend a great deal of time agreeing exactly where each item of information would be stored in the files that were transmitted. These agreements were only active for one trading partner. Start trading with another partner and the requirements would change slightly, a larger product code would perhaps be needed, or a different method of pricing, but the whole negotiation and agreement process had to take place all over again. It kept the programmers busy but did little for the company profits.